Shareholders of Fifth Third Bancorp (FITB) looking to boost their income beyond the stock's 2.2% annualized dividend yield can sell the January 2015 covered call at the $22 strike and collect the premium based on the $1.28 bid, which annualizes to an additional 6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.2% annualized rate in the scenario where the stock is not called away. Any upside above $22 would be lost if the stock rises there and is called away, but FITB shares would have to climb 3.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.3% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost Fifth Third Bancorp To 8.2% Using Options
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